Investing in production of original content for Internet delivery

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SAN JOSE, Calif. — As the Internet has become the people's stage and online video surges in popularity, AtomFilms is launching what could be among the first of many new studios dedicated to the production of video for online audiences.

The Internet video pioneer, which already runs a Web site for pre-produced video shorts or clips from independent creators, plans to keep banking on those projects, which it calls "atom-ized" pieces.

But with AtomFilms Studio, it will finance select projects, investing upfront in the production of original content designed for Internet-based delivery.

The development house has six projects under production already — due for release in the spring — and as many as three dozen others planned for the studio's first year. The initial round ranges from a Craigslist-inspired online dating reality series to a short film about a man who finds himself fighting for his life after a successful date.

Parent company Atom Entertainment Corp. plans to invest "hundreds of thousands of dollars" in the initiative in 2006, with budgets per project expected to vary widely, said AtomFilms' founder and CEO Mika Salmi, declining to be more specific.

Atom hopes its roots dating back to 1999 will give it a jump in the latest online video rush, which has attracted deep-pocketed rivals such as Yahoo Inc. and CBS Corp.

In the early days of AtomFilms, the San Francisco-based startup and other Web sites such as Icebox.com and Pop.com struggled to gain niche viewers with poor-quality, mostly amateur video played over slow Internet connections. The dot-com bust then dashed a number of grand ambitions to produce original content for the Web.

But times have changed. Video quality and computers have improved. More people have faster Internet connections and are turning to the Web as a source of entertainment.

The opening of AtomFilms Studio comes as much larger companies have entered the fray, investing in and distributing video over the Internet to a bigger, high-speed Web-connected audience.

Yahoo, the largest Internet portal with a worldwide audience of more than 300 million, already has forged partnerships to webcast content from other media. Last year, it showed the debut episode of a Showtime series while the show was broadcast simultaneously on cable, as well as exclusive behind-the-scenes footage from the Mark Burnett-produced NBC shows "The Apprentice" and "The Contender."

Yahoo also started to develop more in-house material. It hired film director Richard Bangs to create multimedia packages about exotic outdoor expeditions and war correspondent Kevin Sites to provide dispatches from armed conflicts around the world.

Television networks also are stepping deeper into the new medium by selling their shows online and making them available on mobile gadgets. CBS isn't just reconfiguring its TV programs for Internet distribution, either. It's producing a soap opera in three-minute chunks exclusively for use on cell phones and plans to run a "micro-series" drama that will be shown on both the TV network and cell phones in installments of a minute or less.

Meanwhile, Apple Computer Inc.'s iTunes store, which was the first to secure a major licensing deal to sell TV content online last October, sold more than 8 million videos in three months.

That kind of momentum, along with AtomFilms' success at notching about 5 million registered viewers and securing enough advertising revenue to operate profitably during the last three years, signals that the time is ripe to take Internet video to new levels, Salmi said.

"At some point, the Internet, or broadband entertainment, will be the home base for anything related to video," Salmi said in a telephone interview while en route to the Sundance Film Festival. "Some will look like odds and ends. Some will look like TV. We want to provide the right content."

AtomFilms Studio intends to fund projects that are preferably less than five-minutes long.

"We believe in snack-sized content across all our brands," Salmi said. "We think this is what consumers want for broadband entertainment across various screens."

Atom will not have a physical studio like Paramount or Warner Bros. in Hollywood because it plans to leave film production up to the creators.

Salmi said it also has no intention of dictating projects the way the big movie studios do and that artistic freedom will remain in the hands of the independent producers with whom the studio will share ownership and any revenues generated from the original content.

It's a riskier model than the current setup, under which Atom licenses pre-produced content and relies on viewership to draw advertising revenues. But the studio also could reap handsomely if its original content proves to be a hit and Atom succeeds at finding places to distribute its productions other than its own AtomFilms Web site, such as Apple's iTunes.

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